Chapter 1 completing the application Quiz

What is the maximum penalty for habitual willful noncompliance with the fair credit reporting act

$2,500

Which of the following statements is not true concerning insurable interest as it applies to life insurance

A debtor has an insurable interest in the life of a lender.

The term "illustration" in a life insurance policy refers to?

A presentation of nonguaranteed elements of policy.

An insured pays 100 dollars premium every month for his insurance coverage yet the insurer promises to pay 10,000 for a covered loss. What characteristics of an insurance contract does this describe?

Aleatory

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?

Aleatory

In insurance, an offer is usually made when

An applicant submits an application to the insurer

If an insurance company wishes to order a comsumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following except?

Ancestry

Which is the primary source of information used for insurance underwriting?

Application

The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?

As of the application date

An insurance contract must contain all of the following to be considered legally binding except

Beneficiary's consent

Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision making process

Buyer's Guide

If an applicant for a life insurance policy and the potential is found to be a substandard risk, the insurance company is most likely to?

Charge a higher premium

Because when insurance policy is a legal contract it must conform to the state laws governing contracts which will retire all of the following elements except

Conditions

When a insured makes truthful statements on the application for insurance and paid the required premium it is known as which

Consideration

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?

Consideration.

Which of the following reports will provide the underwriter with the information about an insurance applicants credit?

Consumer report

Contracts that are prepared by one party and submitted to the other

Contracts of adhesion

Which of the following is NOT an example of valid insurable interest?

Debtor in the life of the creditor

Which describes aleatory nature of an insurance contract

Exchange of unequal values

When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will

Issue the policy anyway and pay the face value to the beneficiary

What is the purpose of a conditional receipt

It is intended to provide coverage on a date prior to the policy issue

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called

Material misrepresentations

Which of the following would provide an underwriter with information concerning an applicants health history

Medical Information Bureau

Which of the following information about the applicants is not included in the general information section of the application for insurance?

Medical background

On a participating insurance policy issued by a mutual insurance company dividends paid to policy owners are?

Not taxable since the IRS treats them as a return of a portion of the premium paid

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT

Offer and acceptance

What is the definition of a unilateral contract

One-sided: only one party makes an enforceable promise

A participating insurance policy may do which of the following

Pay dividends to the policyowner

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will

Pay the policy proceeds only if it would have issued the policy

What describes the specific information about a policy?

Policy summary

Which of the following documents delivered to the policy owner includes information about premium amounts, cash values, surrender values and death benefits?

Policy summary

Who might receive dividends from a mutual insurer?

Policyholders

Which would be included in a policy summary?

Premium amounts and surrender values

Gram-Leach-Bliley Act was passed to?

Protect private customer information filed with a financial institution

Another name for a substandard risk is

Rated

The Federal Fair Credit Reporting Act

Regulates consumer reports

Insurance is the transfer of?

Risk

Which of the following best details the underwriting process for life insurance

Selection, classification, and rating of risks

Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles?

Standard risk is representative of the majority of people.

Which one the following types of risk will result in the highest premium?

Substandard risk

How is it determined whether an insurer is allowed to write a business in a state?

The Insurers domicile or location of incorporation will determine whether a company is domestic, foreign or alien

Which if the following is NOT the consideration in a policy

The application given to a prospective insured

In terms of parties to a contract which of the following does NOT describe a competent party?

The person must have at least completed secondary education.

All of the following are requirements for life insurance illustration except

They must be a part of the contract

What is the purpose of the buyers guide

To allow the consumer to compare the cost of different policies

What is the purpose of the buyers guide?

To allow the consumer to compare the cost of different policies

What is the purpose of a disclosure statement in life insurance policies

To explain features and benefits of a proposed policy to the consumer

In forming an insurance contract, when does acceptance usually occur?

When an insurer's underwriter approves coverage

When is the earliest a policy may go into effect?

When the application is signed and a check is given to the agent

If an applicant for a life insurance policy and the person to be insured are two different people, what would be the underwriter's main concern?

Whether an Insurable interest exists between the individuals

The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?

conditional

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable the contract is

conditional

If an insurer requires a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of the examination?

insurer

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?

mutual

In insurance policies the insured is not legally bound to any particular action in the insurance contract but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?

unilateral

If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant

with the policy